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As one town-crier_facebookof his last actions, on January 15, 2018, Governor Christie signed into law S-3409, which establishes standardized changed condition clauses on local public construction contracts.  This new law requires all construction contracts advertised after January 15 to include a change condition provision.

The law addresses four types of change conditions provisions – “differing site conditions”; “suspension of work”; “character of work”; and “change in quantity”.

“Differing Site Conditions”

The law defines “differing site conditions” as the physical conditions at the contract work site that are subsurface or otherwise concealed and which differ materially from those indicated in the contract documents or are of such an unusual nature that the conditions differ materially from those ordinarily encountered and generally recognized as inherent in the work of the character provided for in the contract.

All construction contracts must include the following differing site conditions provisions:

  • If the contractor encounters differing site conditions during the progress of the contract work, the contractor must promptly provide written notification to the contracting unit of the specific differing site conditions encountered before the site is further disturbed and before any additional work is performed in the impacted area
  • Upon receipt of differing site conditions written notice or upon the contracting unit otherwise learning of differing site conditions, the contracting unit must promptly undertake an investigation to determine whether differing site conditions are present.
  • If the contracting unit determines that different site conditions may result in additional cost or delays, the contracting unit shall provide prompt written notification to the contractor containing directions on how to proceed.
    • The contracting unit must make a fair and equitable adjustment to the contract price and contract completion date for increased costs and delays resulting from the agreed upon differing site conditions encountered by the contractor.
    • If both parties agree to the contracting unit’s investigation and directions decrease the contractor’s costs or time, the contracting unit is entitled to fair and equitable downward adjustment to the contract and price
    • If the contracting unit determines that there are no differing site conditions present that would result in additional costs or delays, the contracting unit must notify the contractor, in writing, and the contractor must resume performance of the contract, and be entitled to pursue a differing site conditions claim against the contracting unit for additional compensation or time attributable to the alleged differing site conditions.
  • Contract execution by the contractor constitutes a representation that the contractor has visited the site and has become generally familiar with the local conditions under which the work is to be performed.

Suspension of Work

Contract must include the following suspension of work provisions:

  • The contracting unit must provide advance written notice to the contractor of any suspension of work lasting more than 10 calendar days of the performance of all or any portion of the work of the contract.
  • If the performance of all or any portion of the work of the contract is suspended by the contracting unit for more than 10 calendar days due to no fault of the contractor or as a consequence of an occurrence beyond the contracting unit’s control, the contractor shall be entitled to compensation for any resultant delay to the project completion or additional contractor expenses, and to an extension of time, provided that, to the extent feasible, the contractor, within 10 calendar days following the conclusion of the suspension, notifies the contracting unit, in writing, of the nature and extent of the suspension of work.
    • The notice must include available supporting information, which information may thereafter be supplemented by the contractor as needed and as may be reasonably requested by the contracting unit.
    • Whenever a work suspension exceeds 60 days, upon seven days’ written notice, either party shall have the option to terminate the contract for cause and to be fairly and equitably compensated therefor.
  • Upon receipt of the contractor’s suspension of work notice, the contracting unit must promptly evaluate the contractor’s notice and promptly advise, in writing, the contractor of its determination on how to proceed.
    • If the contracting unit determines that the contractor is entitled to additional compensation or time, the contracting unit must make a fair and equitable upward adjustment to the contract price and contract completion date.
    • If the contracting unit determines that the contractor is not entitled to additional compensation or time, the contractor shall proceed with the performance of the contract work and is entitled to pursue a suspension of work claim against the contracting unit for additional compensation or time attributable to the suspension.
  • Failure of the contractor to provide timely notice of a suspension of work will result in a waiver of a claim if the contracting unit can prove by clear and convincing evidence that the lack of notice or delayed notice by the contractor actually prejudiced the contracting unit’s ability to adequately investigate and defend against the claim.

Change in Character of Work”

The law defines “material change” as a character change which increases or decreases the contractor’s cost of performing the work, increases or decreases the amount of time by which the contractor completes the work in relation to the contractually required completion date or both.

Contract must include the following material change provisions:

  • If the contractor believes that a change directive by the contracting unit results in a material change to the contract work, the contractor must notify the contracting unit in writing. The contractor must continue to perform all work on the project that is not the subject of the notice.
  • Upon receipt of the contractor’s change in character notice the contracting unit shall promptly evaluate the contractor’s notice and promptly advise the contractor of its determination on how to proceed in writing.
  • If the contracting unit determines that a change to the contractor’s work caused or directed by the contracting unit materially changes the character of any aspect of the contract work, the contracting unit must make a fair and equitable upward adjustment to the contract price and contract completion date.  The basis for any such price adjustment shall be the difference between the cost of performance of the work as planned at the time of contracting and the actual cost of such work as a result of its change in character, or as otherwise mutually agreed upon by the contractor and the contracting unit prior to the contractor performing the subject work.
  • If the contracting unit determines that the contractor is not entitled to additional compensation or time, the contractor must continue the performance of all contract work and is entitled to pursue a claim against the contracting unit for additional compensation or time attributable to the alleged material change.

Change in Quantity

The law defines “bid proposal quantity” as the quantity indicated in the bid proposal less the quantities designated in the project plans as “if and where directed.”

Contract must include the following change in quantity provisions:

  • Contracting unit may increase or decrease the quantity of work to be performed by the contractor
  • If the quantity of a pay item:
    • Is cumulatively increased or decreased by 20% or less from the bid proposal quantity, the quantity change is considered a minor change in quantity.
      • The contracting unit must make payment for the quantity of the pay item performed at the bid price for the pay item
    • Is cumulatively increased or decreased by more than 20% from the bid proposal quantity, the quantity change is considered a major change in quantity.
  • For major increase:
    • the contracting unit or the contractor may request to renegotiate the price for the quantity in excess of 120% of the bid proposal.
    • If mutual agreement cannot be reached the contracting unit must pay the actual cost plus an additional 10% for overhead and additional 10% for profit unless otherwise specified in the original bid.
  • For major decrease:
    • The contracting unit or the contractor may request to renegotiate the price for the quantity of work performed
    • If mutual agreement cannot be reached the contracting unit must pay the actual cost plus an additional 10% for overhead and additional 10% for profit unless otherwise specified in the original bid. Provided that the contracting unit does not make a payment in an amount that exceeds 80% of the value of the bid price multiplied by the bid proposal quantity.

The law requires the Division of Local Government Services to promulgate rules and regulations to standardize the forms and procedures for the change conditions process within 90 days.

We suggest you review this new law with your purchasing officials, municipal engineer, and municipal attorney.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

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